Filed under: Management, Insiders, Google (GOOG)

With revenues of $16.5 billion and a cash hoard of $14 billion, Google (NASDAQ: GOOG) is certainly no longer a scrappy startup. In fact, Wall Street is getting somewhat concerned about the company’s prospects, as seen with the recent decline in the once mighty stock price.

So it’s no surprise that some of Google vets are leaving for other opportunities.

According to The Wall Street Journal (subscription), the latest to make a move is Sheryl Sandberg, who was the vice president for global online sales and operations (actually, her bio is still on the Google site).

Her next stop: the popular social networking site, Facebook.

Basically, she will help the site with its monetization. She definitely has the credentials. She joined Google in 2001 and was instrumental in the company’s online advertising efforts.

Actually, there is skepticism that social networks can effectively scale their money-making capabilities, at least to the extent of standouts like Google. Interestingly enough, this was the sentiment on Google’s recent earnings conference call.

There’s no doubt that Sandberg gets many job offers. So her decision to go to Facebook is definitely significant - especially since the company’s latest valuation was about $15 billion.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Google (GOOG), Yahoo! (YHOO)

Shareholder activists use a variety of tools to combat lagging companies, such as proxy fights, litigation and so on.

With the growth of social media, we are now seeing new approaches, and one of the innovators is Eric Jackson.

He is using Google (NASDAQ: GOOG)’s YouTube to confront a variety of companies, such as Yahoo! (NASDAQ: YHOO). In fact, he was a key factor in the company’s shareholder meeting last year (example here). Keep in mind that Yahoo’s CEO, Terry Semel, soon left the company.

Well, according to a piece in FINalternatives.com, Jackson now has his own hedge fund, called Ironfire Capital.

Jackson ’s approach isn’t completely hostile. In the early stages, he tries to work with a target, but if that doesn’t work, he mobilizes the forces of the Internet. And as we’ve seen lately, that can be quite powerful.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Management, Insiders, Google (GOOG)

With revenues of $16.5 billion and a cash hoard of $14 billion, Google (NASDAQ: GOOG) is certainly no longer a scrappy startup. In fact, Wall Street is getting somewhat concerned about the company’s prospects, as seen with the recent decline in the once mighty stock price.

So it’s no surprise that some of Google vets are leaving for other opportunities.

According to The Wall Street Journal (subscription), the latest to make a move is Sheryl Sandberg, who was the vice president for global online sales and operations (actually, her bio is still on the Google site).

Her next stop: the popular social networking site, Facebook.

Basically, she will help the site with its monetization. She definitely has the credentials. She joined Google in 2001 and was instrumental in the company’s online advertising efforts.

Actually, there is skepticism that social networks can effectively scale their money-making capabilities, at least to the extent of standouts like Google. Interestingly enough, this was the sentiment on Google’s recent earnings conference call.

There’s no doubt that Sandberg gets many job offers. So her decision to go to Facebook is definitely significant - especially since the company’s latest valuation was about $15 billion.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Google (GOOG), Yahoo! (YHOO)

Shareholder activists use a variety of tools to combat lagging companies, such as proxy fights, litigation and so on.

With the growth of social media, we are now seeing new approaches, and one of the innovators is Eric Jackson.

He is using Google (NASDAQ: GOOG)’s YouTube to confront a variety of companies, such as Yahoo! (NASDAQ: YHOO). In fact, he was a key factor in the company’s shareholder meeting last year (example here). Keep in mind that Yahoo’s CEO, Terry Semel, soon left the company.

Well, according to a piece in FINalternatives.com, Jackson now has his own hedge fund, called Ironfire Capital.

Jackson ’s approach isn’t completely hostile. In the early stages, he tries to work with a target, but if that doesn’t work, he mobilizes the forces of the Internet. And as we’ve seen lately, that can be quite powerful.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Deals, Google (GOOG), Boston Scientific (BSX)

Recent data suggests that America’s largest industrial companies are piling up cash. The New York Times reports: “According to S.& P., the total cash held by companies in its industrial index exceeded $600 billion in February, up from about $203 billion in 1998.”

That is good news if the money does something other than sit in the bank. A number of very large companies like Google (NASDAQ: GOOG) don’t need anywhere near the tons of greenbacks in their accounts and they add more every quarter.

The money probably has two potential uses. One is to buy other companies — as the market falls, there are going to be more deals at lower prices. Of course, many deals don’t work. Some of these will fail to find economies of scale and lead to write-offs like the Boston Scientific (NYSE: BSX) buyout of Guidant. Everyone lost as the BSX shares fell apart.

The second option is that companies could just do the simple thing and turn the cash back to shareholders. Everyone wins and it is hard to screw up a big one-time dividend.

Douglas A. McIntyre is an editor at 247wallst.com

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God bless the account executives for banks that have put me on their rate sheet and promo distribution email lists without my permission. Without their blatant spamming of my email account (I guess they assume that since they read Blown Mortgage that I must be interested in their product offering) I would never come across these gems.

This email that I am about to share is overly typical. It shows you in black and white that the conflict of interest of sales vs. sensible lending is alive and well even in the midst of a underwriting tightening. Bank account executives who need to make their numbers push the most aggressive of their underwriting guidelines to their brokers in the hopes of winning loans. They allude to fraud, they promote the idea of “getting away with” fraudulent information on loan applications. They push the most aggressive (and least common-sense) of all of their loan products.

The mortgage mess will not get better until these practices are cleaned up. Big banks - are you listening? If you want to protect yourself from future write-downs you may want to look at what type of business your sales agents are drumming up.

This one from a Wachovia rep but it could be any of the big banks on any given day. And pardon the spelling, we’re not always dealing with rocket scientists here:

Subject:
NO MINIMUM TRADE LINES - NO SCORES - JUMBO CASHOUT STATED 620 - INNER FAMILY TRANSFERS

WHAT WACHOVIA’S PORTFOLIO CAN DO FOR YOU………….

620 FICO STATED WAGE EARNER – 80 LTV – CASHOUT

620 STATED FIXED INCOME – 80 LTV CASHOUT

STATED OPTIONS ARMS – UP TO 90 LTV PURCHASE OR RATE AND TERM ( 700 FICO )

INERFAMILY TRANSFERS – 70 LTV

FIXED RATE OPTION ARMS

100% GIFT FUNDS – NO GIFT LETTER NEEDED

30% GIFT OF EQUITY

JUMBO STATED CASHOUT – NO ADDS

LLC LOANS

BROKERS AND REALTORS LOANS

90 DAYS OFF MLS ( 60 DAYS BY EXCEPTION)

NO MINIMUM TRADE LINES

NO MINIMUM FICO SCORES 75 LTV

NO CREDIT OK

NO LIMIT TO AMOUNT OF PROPERTIES

WE NEVER AS FOR 4506T

STATED NON OWNER CASHOUT 70 LTV

FOREIGN NATIONALS TO 70 LTV – ONLY NEED VALID PASSPORT

CO BORROWER DOES NOT NEED SOC SEC NUMBER – 80 LTV STATED

Why do account executives push the shady aspects of their guidelines?

“We never ask for a 4506T” implies that income will not be checked on stated income loans. That is pretty much an open invitation to over-state income because there is no recourse for the lender to request tax returns on the individual. The 4506T lets lenders order tax returns from the IRS on the borrower. These are usually executed only if the loan goes bad as part of QA to find out what went wrong with the loan.

Of course, if the 4506T is materially different from the income on the loan application there could be reprecussions against the loan officer (either retail or broker) for a fraudulent loan application.

Brokers and Realtor Loans

Many banks are now eliminating stated income loans for brokers and realtors as conflict of interest loans. Not only is it likely that the broker or realtor making less this year; but the fact that they know how to “work the system” by over-stating income and assets makes them particularly high risks when it comes to financing. By highlighting (and these were highlighted in rainbow colors in the original email) these nuances the account executive is telegraphing the ability of Realtors and Brokers to utilize this loop-hole to secure their financing (no matter how legitimate it is).

I could go on - but most of those “highlights” scare me to death. If loans are still be underwritten with some of those guidelines we are going to continue to see poor vintage quality for 2008. This of course pushes out the time horizon of recovery as these loans will no doubt go bad at a higher rate than conforming or fully-documented loans. Until banks stop pushing the edge and start promoting reasonable and responsible lending practices by all parties (and not leaving suggestive invitations for fraud and malfeasance) we won’t be able as an industry and a country to put this housing crisis behind us.

Is it just me or is this type of advertising bad for our industry?

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God bless the account executives for banks that have put me on their rate sheet and promo distribution email lists without my permission. Without their blatant spamming of my email account (I guess they assume that since they read Blown Mortgage that I must be interested in their product offering) I would never come across these gems.

This email that I am about to share is overly typical. It shows you in black and white that the conflict of interest of sales vs. sensible lending is alive and well even in the midst of a underwriting tightening. Bank account executives who need to make their numbers push the most aggressive of their underwriting guidelines to their brokers in the hopes of winning loans. They allude to fraud, they promote the idea of “getting away with” fraudulent information on loan applications. They push the most aggressive (and least common-sense) of all of their loan products.

The mortgage mess will not get better until these practices are cleaned up. Big banks - are you listening? If you want to protect yourself from future write-downs you may want to look at what type of business your sales agents are drumming up.

This one from a Wachovia rep but it could be any of the big banks on any given day. And pardon the spelling, we’re not always dealing with rocket scientists here:

Subject:
NO MINIMUM TRADE LINES - NO SCORES - JUMBO CASHOUT STATED 620 - INNER FAMILY TRANSFERS

WHAT WACHOVIA’S PORTFOLIO CAN DO FOR YOU………….

620 FICO STATED WAGE EARNER – 80 LTV – CASHOUT

620 STATED FIXED INCOME – 80 LTV CASHOUT

STATED OPTIONS ARMS – UP TO 90 LTV PURCHASE OR RATE AND TERM ( 700 FICO )

INERFAMILY TRANSFERS – 70 LTV

FIXED RATE OPTION ARMS

100% GIFT FUNDS – NO GIFT LETTER NEEDED

30% GIFT OF EQUITY

JUMBO STATED CASHOUT – NO ADDS

LLC LOANS

BROKERS AND REALTORS LOANS

90 DAYS OFF MLS ( 60 DAYS BY EXCEPTION)

NO MINIMUM TRADE LINES

NO MINIMUM FICO SCORES 75 LTV

NO CREDIT OK

NO LIMIT TO AMOUNT OF PROPERTIES

WE NEVER AS FOR 4506T

STATED NON OWNER CASHOUT 70 LTV

FOREIGN NATIONALS TO 70 LTV – ONLY NEED VALID PASSPORT

CO BORROWER DOES NOT NEED SOC SEC NUMBER – 80 LTV STATED

Why do account executives push the shady aspects of their guidelines?

“We never ask for a 4506T” implies that income will not be checked on stated income loans. That is pretty much an open invitation to over-state income because there is no recourse for the lender to request tax returns on the individual. The 4506T lets lenders order tax returns from the IRS on the borrower. These are usually executed only if the loan goes bad as part of QA to find out what went wrong with the loan.

Of course, if the 4506T is materially different from the income on the loan application there could be reprecussions against the loan officer (either retail or broker) for a fraudulent loan application.

Brokers and Realtor Loans

Many banks are now eliminating stated income loans for brokers and realtors as conflict of interest loans. Not only is it likely that the broker or realtor making less this year; but the fact that they know how to “work the system” by over-stating income and assets makes them particularly high risks when it comes to financing. By highlighting (and these were highlighted in rainbow colors in the original email) these nuances the account executive is telegraphing the ability of Realtors and Brokers to utilize this loop-hole to secure their financing (no matter how legitimate it is).

I could go on - but most of those “highlights” scare me to death. If loans are still be underwritten with some of those guidelines we are going to continue to see poor vintage quality for 2008. This of course pushes out the time horizon of recovery as these loans will no doubt go bad at a higher rate than conforming or fully-documented loans. Until banks stop pushing the edge and start promoting reasonable and responsible lending practices by all parties (and not leaving suggestive invitations for fraud and malfeasance) we won’t be able as an industry and a country to put this housing crisis behind us.

Is it just me or is this type of advertising bad for our industry?

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Housing Wire has all the coverage of the landmark change in lending guidelines as Fannie and Freddie both eliminated broker-ordered appraisals for loans purchased by the GSEs.  We talked about the problem with broker-ordered appraisals in the last mortgage minute; but let’s take a look at the language of the agreement which was reached as part of a settlement with the New York state attorney general Andrew Cuomo.

From Housing Wire on Fannie and Freddie no longer accepting broker-ordered appraisals:

The agreement, which hit a snag last week, was finalized Monday morning and will eliminate broker-ordered appraisals and reduce the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages.

“With this agreement, Fannie Mae and Freddie Mac have become leaders in transforming the mortgage industry,” said Cuomo. “Now national banks have a clear choice: immediately adopt the new code and clean up appraisal fraud in the mortgage industry or stop doing business with Fannie Mae and Freddie Mac – it is that simple.”

Brokers singled out - get used to it

We’ve talked for months about how brokers are going to get the short-end of the stick when the powers-that-be hand down the changes as a result of the mortgage meltdown.  Our argument at the time (and we hold it today) was that these regulations and licensing changes would pile up to result in a competitive advantage for the big banks which in turn would drive the extinction of the mortgage broker.  The elimination of broker-ordered appraisals is just another step in the direction of driving mortgage brokers (or at least a large majority) out of the lending picture.

Note that Fannie and Freddie are not “eliminating” in-house ordered appraisals, just the broker-ordered appraisals.  Big banks that order appraisals will continue to be eligible for Fannie and Freddie even with the conflict of interest inherent with in-house appraisal orders.

Another advantage for retail loan officers

Put another arrow in the quiver of the  retail loan officer.  On ultra-competitive conforming loans retail agents will be able to “guarantee” a value for new home loans by checking with their in-house appraiser prior to ordering the report.  Brokers, who will have to rely on a third-party appraisal will have to convince would-be borrowers to shell out $350 or more on a crap-shoot with nothing but “seasoned” title comps through a review of public records.

Brokers will have a very difficult time competing against the service provided by a retail loan officer who is not limited by the need to use an independent appraiser.

How brokers can compete

Brokers will need to get savvy about appraised value and find ways to provide accurate estimates of value without being able to call their “go to guy” who can be counted on to bring in a property “at value.”  Brokers who are smart will use automated valuation software that is sanctioned or used by the target end investor.  They’ll know that those in-house appraisers for the retail team will be guided heavily by the AVM as they deal with volume.

Brokers that invest in AVMs will be able to provide accurate estimates PRIOR to ordering the appraisal and give their borrowers a confident estimate that will be fairly close to what any retail loan officer could provide.

Good for the Economy

This is a good move.  Conflict of interest appraisals have turned this industry in to a mockery as property values have been laughably inflated to get financing put in place.  However, the implementation of the legislation is typically pro big guy and anti-competitive to the little guy.  In-house appraisals should be eliminated with broker-ordered appraisals - not “curtailed” (a dubious descriptor if ever there was one).

Brokers Hosed

The brokers are the whipping boys.  Not that there isn’t some major aspect of cosmic karma evening up the score a bit; but for the good brokers who have run a good business and have made smart business moves to survive it’s a bitter pill to swallow.  What is your reward for soldiering through the toughest downturn seen in decades?  More regulatory and competitive disadvantages to suck your capitial, time and resources.   Seems worth it to keep on keeping on, doesn’t it?  The best part - this is only the beginning!

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Filed under: Deals, Bad news, Citigroup Inc. (C)

Citigroup (NYSE: C) may need more cash. The head of Dubai International Capital told Reuters that it would take “a lot more money” to rescue Citigroup following investments from Abu Dhabi, Kuwait and Saudi Arabia’s Prince Alwaleed.

The statement has the benefit of probably being true. Citi is almost certainly faced with more subprime losses and its derivative holdings of credit cards and munis plus LBO paper could lead the bank to have to write-off billions more in losses from these.

The question is where will the big bank go. Sovereign funds may not have an appetite for putting up more capital. US private equity firms may find the deal to risky. Things may get bad enough that the Fed will have to step in an give Citi a huge loan to keep its balance sheet solid enough for the bank to remain solvent.

The “a lot more money” may come from taxpayers.

Douglas A. McIntyre is an editor at 247wallst.com

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Filed under: Market matters, Amer Intl Group (AIG), Housing, Cramer on BloggingStocks

TheStreet.com’s Jim Cramer says Pennsylvania’s foreclosures are declining, thanks to a plan that can be applied nationally.

We keep hearing how the AAA paper is unfairly being marked down because of the “need” to sell. We hear that if the paper, particularly the mortgage paper, were allowed to be held, there would be no problem, that, for example, the Thornburg (NYSE: TMA) (Cramer’s Take) paper, which is most likely not going to default, or the paper that AIG (NYSE: AIG) (Cramer’s Take) is insuring, the so-called super senior, which is also most likely not going to default. We keep believing that the real issue is the markings, and how the markings reflect unrealistically depressed valuations.

Obviously the Fed believes this, too or it wouldn’t have been so complacent. So why doesn’t the Fed puts its money where its mouth is, and do something, non-bailoutish, that exploits the market’s imperfection. Why doesn’t it issue $50 billion of two-year notes at 1.60% and take the money and buy high quality mortgages and other collateralized obligations, the very stuff that everyone says will pay off over time. Then the Fed can make money holding the stuff, the banks get more liquid, which takes the pressure off their balance sheets, and no bailout occurs?

Continue reading Cramer on BloggingStocks: Fed needs to follow the Pennsylvania plan

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